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NI payments/qualifying years and state pension - confused?

Discussion in 'Retirement' started by stopwatch, Nov 25, 2017.

  1. stopwatch

    stopwatch Established commenter

    Thought I would start a thread on this as it has currently crept into another thread ('What are the downsides and drawbacks of retirement'). Thought it might be worth it's own thread.

    Things I have picked up:
    • I have looked at my forecast and also my payments summary and am currently up for 31 years full payment, giving £129 per week if I pay no more. Forecast is full pension if I continue to pay for 4 more complete years (note the word 'complete')
    • I have seen a couple of articles stating you can buy extra years for around £733 each year giving you 1/35th extra per year which is paid.
    • That teachers are part of a 'contracted out' scheme. The worrying thing is that. although you may have paid 'full' years. you don't seem to get 1/35th of the full pension (this is the bit that confuse me). This page on the HMRC page says I am eligible for around £64.26 per week.
    So I am wondering/worrying - am I only going to get £64 or am I going to get £129? - www.confused.com
     
  2. Sundaytrekker

    Sundaytrekker Star commenter

    Gosh it’s confusing. My page says I have 38 qualifying years but still need four more to get the £155 per week. I already have the old entitlement. The new system is counting from April 16, I think. You get the best of the old system entitlement or the new system entitlement.

    Yes, I understand it’s possible to pay voluntary contributions as you say. I am hoping my part time earnings will do that for me but will pay if needed. Earnings have to be above the minimum threshold to qualify but you don’t have to actually pay contributions till the next threshold. Each employment counts separately so my two jobs for separate schools should mean I can qualify without paying much. Confusing, isn’t it?

    Your 31 years giving £129 per week sounds about right so far. But I don’t understand where the £64 comes from. Did you have a varied part time employment record? Child benefit payments qualify you for those years if they were in your name and that applies.

    Not sure if that’s added anything extra.
     
  3. lizziescat

    lizziescat Star commenter

    As ST says
    I think the £733 ish applies to a those born after 1953 /1952 and due to claim state pension after 2017 and won’t get new pension due to being contracted out and aren’t paying NI due eg to having retired. (And thus not getting the benefit from paying NI under the new system.)
     
    wanet and Sundaytrekker like this.
  4. phatsals

    phatsals Occasional commenter

    When the new scheme was introduced, two calculations were carried out, one under the old and the other under the new scheme. This is where the two amount you saw came from.

    Under the old scheme you had full contributions for the State Pension, around £119pw at the time. You may have had a little more with NI contributions but would not be able to increase your amount even though you would have to continue to pay in as long as you were in employment.

    Under the new scheme you retained your already earned benefits ie £119 but can continue to accrue pension benefits. If you continue to earn or decide to pay for the additional years you will get the full State Pension of around £159pw.

    Where it is misleading is when it says 35 years for full State Pension. That is only if you never contracted out and you always paid full NI. As with all pensions, we paid reduced NI which went into the Teachers Pension, and the benefits with TP far outweigh the State Pension reduction.
     
    eljefeb90, wanet and Sundaytrekker like this.
  5. wanet

    wanet Star commenter

    I got slightly less than the new state pension based on my old state pension. but i did work outside of teaching initially, and benefitted from some old serps.
     
  6. frangipani123

    frangipani123 Lead commenter

    You do need to go online and check your forecast. Having said that, mine makes it look as if I will receive a full state pension even though I have been contracted out at certain points. It does have the waiver that it is not necessarily accurate, they cover themselves in the event of an error. Once you have the forecast you can go from there. Paying the extra amount to obtain the full pension seems worth it.
     
  7. frangipani123

    frangipani123 Lead commenter

    Aaah, I see that you have signed up to Gateway.
     
  8. welshskyline

    welshskyline New commenter

    If, when you access your state pension statement, you find that you are a few years "light" remember that you can also pay voluntary Class 2 NI if you are "Self-Employed". You only need to earn a nominal amount and the contributions will only cost £150 a year. This what I am currently doing, having 38 "full years" of NI but only 29 years for the State Pension.

    This opportunity is going to continue until at least 2019 although it looks like the Govt will close this attractive "loophole" after that date - still in the consultation period, however.
     
    frangipani123 likes this.
  9. pennyh.

    pennyh. Occasional commenter

    I asked for a State Pension Statement (dated last March) I had to get a paper one because online did not apply for me. It stated I had 39 qualifying years (I assume something is credited from something in addition to my 36 years of teaching). It will be the contracted out level but quotes an estimated COPE equivalent paid as part of the workplace pension. It does not state anything about NI years and separate statement on State pension years.
     
  10. phatsals

    phatsals Occasional commenter

    Everyone had 3 years credited for ages 16-19. When you asked for a State Pension statement it is separate from a NI statement which would include years paid and years where there is a shortfall (if any).

    I'm not sure what you mean by State pension years, the 39 qualifying years are the ones counted up to now. Any NI contributions from 2016 will go towards the new State Pension if you haven't yet reached the threshold.
     
  11. pennyh.

    pennyh. Occasional commenter

    Thank you- I was sent a state pension statement based on NI contributions so I thought that was it. I have gone back to the Gov site and see there are two sections and that I can get the NI years for this country. Having taken ARB and not being due a state pension until 66 I keep wondering whether to add to the state pension in the use of class 3 contributions as discussed in other posts . I get confused by the phrasing in the Gov. website because with 39 years I do not have gaps.

    Find out if you have gaps by requesting your National Insurance record. Your record will tell you if you can pay voluntary contributions to fill gaps and how much it will cost you.
     
  12. pennyh.

    pennyh. Occasional commenter

    Tried again using HMC Gateway and it won't tell me on line the England NI history part for me- it just takes me back to the paper pension statement.
     
  13. phatsals

    phatsals Occasional commenter

    If you have been given a foundation amount of less than £159 (this years pension) and you are still below State Pension age then you can pay for the missing years. This is only years from 2016, not before, so any previous gaps would be irrelevant. This is because pre 2016 is the old State Pension where reduced National Insurance was paid. Since 2016 everyone pays the full amount regardless, hence we will become entitled to a higher State Pension.

    By NI, I meant National Insurance rather than Northern Ireland, I apologise if this was in any way misleading.
     
  14. pennyh.

    pennyh. Occasional commenter

    Thank you- sorry to labour this, so I will receive old state pension based on everything up to April 2016 which is about £122 plus what ever that has gone up to by the time I apply. Then from April 2016 the NI calculation on the new system and the higher rate I paid adds a little bit? I only paid new rate from the April until August 2016. I took ARB at 58 and get pension at 66.
    So does the phrase 'missing years' mean from 58-66 I can top up?
     
  15. phatsals

    phatsals Occasional commenter

    Yes, your foundation amount is the £122. If you have say 5 years left to State Pension age, you can contribute for 5 more years. Each year you contribute adds around £4.30pw to your State Pension. Again, using 5 years it would provide an additional £21/£22 pw. If it's 7 years, then you can be closer to an additional £30pw.

    You wouldn't be able to pay for these years in advance, the only year you could buy so far would be 2016/17 but if you were employed you may already have that year in the pot.
     
  16. lizziescat

    lizziescat Star commenter

    I have a statement of NI contributions from DWP which shows exactly when I acquired the additional 4 years of contributions (on top of my 36 years teaching). I think this is separate from your pension forecast .
    I contacted HMRC about this a couple of days ago (look for the Future Pension link on the website for the number) . I got through immediately and had a useful conversation with the lady there. I will contact again after she has sent me an up to date pension forecast( my last one was three years ago) to get the details of costs/benefits.

    My understanding is that you can pay for contributions only for years after 2016 when the new system started and for those years where you have no other means of NI contributions. So you might not be able to make up all ‘lost ‘years.
    If ‘Missing years’ refers to pre new system missing years which you can ‘buy back’ but if you already have the full qualifying years , I’m not sure there’d be any benefit.

    Phone Future Pension for exact individual information.( there are various other tweaks and circumstances eg caring duties which might come int9 play)
     
  17. pennyh.

    pennyh. Occasional commenter

    Thanks, I will phone-all this helps me ask the questions and hopefully understand the answers!
     
  18. welshskyline

    welshskyline New commenter

    Yes, it is important to understand that additional NI contributions (ie buying extra years) will only add to your State Pension if you purchase them from 2016/17 onwards. Any contributions to earlier years will have no effect.
     
  19. jubilee

    jubilee Star commenter

    It may be counter-productive to pay some or all of the voluntary contributions for the tax years from April 2016 until the 5th April prior to your retirement age. That's because you will never get the full £159 new State Pension if you have been contracted out at some point (contracted out of the old SERPS, the State second pension).
    The State pension forecast should tell you the maximum that you coud get under the new system if you make up a certain number of the tax years after 6th April 2016. I can boost my State pension to about £144 per week if I make voluntary contributions for the current and previous tax years. It will cost me about £1480 to get an extra £9-80 per week. I'd need to live hree years into receiving the pension to break even, so I'll probably cough up the money. I was told to do it a good 4 months or so before claiming the pension to allow for it all to be recorded properly when they make the final payment calculations.

    I could avoid paying for the NI years by claiming Carer's Allowance if I helped a qualifying person with personal care and also would get NI from earning the Lower Earnings Limit in any tax year, or by claming JSA or other State Benefit.

    If somone has low or nil savings and has a deficient NI record, it may not be worth paying voluntary NI as a low State pension would be topped up under means-testing in retirement. My father-in-law struggled to fund a small private pension and then commuted some of it to provide M-I-L with an enhanced Widow's benefit each month. She ended up receiving £48 per month from that private pension but qualified for means-testing so the sacrifices made to fund that pension were wasted. They'd have topped up her state pension by amounts they actually paid her, plus the £48 that they had funded themselves in the frugal years prior to retirement.
     
  20. jubilee

    jubilee Star commenter

    You can still make up NI years prior to 2016. I think you can make up deficient years going back 10 years and they will tell you how much is missing from each tax year. I have one pre-2016 tax year that would only need about £180 to make it a qualifying year. However, they told me not to pay it as I already have the 30 year NI years (combination of work NI years and NI credit years) and making it 31 years makes no difference to my pension forecast. Only paying for 2016/17 and 2017/8 will make a difference to my State pension.

    There seems to be some misunderstanding in some posts. being Contracted out (via Teachers' Pension or other occupational pension) does not opt you out of a State pension for those years. What you paid in reduced NI payments (10.6 %, I think, instead of 12%) funded your basic State pension. You were only opted out of the State Second Pension (Serps). They now make a calcualtion based on the new maximum pension and deduct a certain amount for each Contracted out year. If I pay for the 2 post-2016 years, I will get about £144 per week, with about £15 per week thus clawed-back from the maximum to account for my Social Services/TPS contracted-Out years.
    If claimants have worked far more Contracted-Out years, the new pension calculation could end up, on more NI years, as lower than the calculation for 30 years under the pre-2016 lower State Pension. In that scenario, you get the amount that you qualified for under the old system.
     
    lizziescat and eljefeb90 like this.

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